STATE OF FLORIDA

DIVISION OF ADMINISTRATIVE HEARINGS

SOUTHERN STATES UTILITIES, INC., ) UNIVERSITY SHORES DIVISION, )

)

Petitioner, )

)

vs. ) CASE NO. 80-1182

) FPSC NO. 790760-WS FLORIDA PUBLIC SERVICE COMMISSION )

)

Respondent. )

)

RECOMMENDED ORDER

An administrative hearing was held on the above matter by H.E. Smithers on July 24, September 29 and 30, and October 1, 1980, at Orlando, Florida. The Petitioner was represented by R.M.C. Rose, the Respondent by William H. Harrold, and the intervening customers by the Office of Public Counsel -- Jack Shreve, Stephen C. Burgess and Benjamin H. Dickens, Jr.

This matter commenced by Southern States Utilities, Inc. (Petitioner, Utility or Southern) filing an application on January 21, 1980 with the Florida Public Service Commission (Respondent, Commission or FPSC) seeking to increase rates for water and sewer services furnished its University Shores Division customers located in Orange County. Using a June 30, 1979, test year, the application sought a water revenue increase so as to obtain constructed annual gross revenues of $94,550 and a sewer revenue increase so as to obtain constructed annual gross revenues of $123,000. Subsequently Petitioner proposed to increase the annual gross water revenue by $8,454 but this post-notice enlargement of the application is not permitted; however, the post-notice reduction of $5,229 annual sewer revenue is acceptable. The Commission suspended the proposed rates but authorized constructed interim annual gross revenues of $68,841 for water and $81,720 for sewer, under bond (Order 9251 issued February 19, 1980).

The issues are what revenues, if any, should be authorized and what rate structure is appropriate. More particularly, the parties accepted the use of a base facility charge rate structure, and the Petitioner and the Respondent were in general agreement on all financial matters while Intervenor cross-examined this evidence or made various motions related to specific subject matters.

The record consists of 346 pages of transcript, Petitioner's Exhibits 1-8, Respondent's Exhibits 1-3, and Intervenor's Exhibits 1-3 (Copy of 1-4 not received, therefore not in evidence). Seventeen customers of the systems testified, as did five witnesses for the Petitioner and three witnesses for the Respondent.

Petitioner's and Respondent's proposed findings of fact are accepted and included in this recommended order. Intervenor's purported proposed findings of fact (#1-11) are conclusions of law and as such, are specifically rejected;

also, Intervenor's request to take official recognition that was included in the purported proposed findings (p.23) is rejected as not being timely.

FINDINGS OF FACT

1. The Petitioner is a utility regulated by the Commission that is in the business of acquiring and operating water and sewer systems in Florida, principally in Central Florida. It now operates 39 systems, of which at least

   30 water systems and 5 sewer systems are located in Orange, Lake and Seminole counties. In this case, the utility serves 547 water customers and 528 sewer customers in a subdivision known as University Shores. Southern commenced operating these systems in June, 1978, purchased them from University Shores Utilities, Inc. in September, 1978, and applied to the Commission for a transfer, which application was approved November 1, 1978, by Order 8550. The rates for service by these systems were granted by Order 6822 on August 6, 1975.

   
   

2. Notwithstanding customer complaints of the quality of the water service (smell, taste, excess chlorine, sediment and no-noticed interruptions), the systems are in compliance with governmental standards. No customer complaints had been made to regulatory agencies, and the utility had handled only five for 1979 and to date in 1980.

   
   

3. Due to a large increase in number of customers, a year end, rather than average, test year is appropriate; and the facilities are used and useful.

   
   

4. Petitioner's rate bases are computed as follows:

   
   

   	WATER	SEWER
   Year end test year plant	$526,737	$957,176
   Construction Work in Progress	2,500	-0-
   Acquisition adjustment
   (net of amortization)	(41,490)	(78,300)
   Accumulated depreciation	(67,172)	(128,393)
   CIAC (net of amortization)	(186,470)	(489,438)
   Working Capital	5,476	6,386
   Income tax lag	(2,951)	(4,225)
   	$236,630	$263,214

   
   

5. The following capital structure and rate of return is that agreed to by the Petitioner and Respondent prior to intervention by the customers:

   
   

   WEIGHTED

   TYPE AMOUNT RATIO COST COST

   Common Stock $1,882,055 60.44 14.0 percent 8.46

   Long Term Debt 1,037,372 33.31 8.89 2.96

   Cost Free 194,768 6.25 0 0

   TOTAL $3,114,195 100.00 11.42 percent

6. The above rate bases and rate of return provide an authorized constructed net operating income from water service of $22,523 and from sewer service of $30,059. Although the return on water service is only 9.52, the revenue is limited to that in the application. This results in the following constructed statement of operations for year ended June 30, 1979:

   
   

   	WATER	SEWER
   Operating Revenue	$94,550	$117,814
   Operating Expense

   Operation		41,853	49,838
   Maintenance		1,950	1,244
   Depreciation		5,964	7,451
   Amortization		(860)	(1,598)
   Taxes, other	than income	8,363	9,726
   Income taxes		14,757	21,124
   TOTAL		$ 72,027	$ 87,785
   Net Operating Income		$ 22,523	$ 30,059
   Rate Base		$236,630	$263,214
   Rate of Return		9.52	11.42 percent

   
   

   It is noted that the above revenue requirement is more than the interim authorized revenue of $68,841 for water and $81,720 for sewer.

   
   

7. The staff proposed that the rate structure should be changed from the present block structure for water and flat rate for sewer to a base facility charge for both water and sewer. This concept is appropriate since it serves to conserve water and insures that each customer pays his fair share of the costs of providing service. No evidence opposing this type rate structure was presented.

   
   

   CONCLUSIONS OF LAW

   
   

8. Section 367.001(2), Florida Statutes (1979),provides in pertinent part:

   
   

   The commission shall. . .fix rates which are just, reasonable, compensatory, and not unjustly discriminatory. In all such proceedings, the commission shall consider the value and quality of the service and the cost of providing the service, which shall include, but not be limited to, debt interest, the utility's requirements for working capital, maintenance, depreciation, tax, and operating expenses incurred in the operation of all

   property used and useful in the public service. . .

   
   

9. As previously noted, Petitioner and Respondent are in accord on this application. Intervener presented no evidence, rather contends that certain financial items (such as return on equity, working capital, add-back of amortization of CIAC to rate base, and facilities used and useful) have not been proved or should be excluded as a matter of law. However, the quality and quantity of the required financial evidence as presented by the Petitioner was corroborated by the Respondent at least to the extent of the above findings of fact.

   
   

10. Intervenor overlooks an end result or does not wish to advocate one. More particularly, Intervenor's arguments are basically the same as those made by Public Counsel in two recent water and sewer rate matters; the Respondent's disposition of those arguments is applicable here and need not be discussed individually or in detail considering the recommendation made below. Docket 780022-WS; Order 9443. Dockets 790316-WS and 790317-WS; Order 9533 (Stayed at the request of the Petitioner by Order 9610.).

RECOMMENDATION

Based on the foregoing findings of fact and conclusions of law, it is RECOMMENDED that the application of Southern States Utilities, Inc.,

University Shores Division, be granted and that the utility he authorized to file new tariffs to be approved by the Florida Public Service Commission that would have provided for the test year ending June 30, 1979 annual gross revenues of $94,550 for water service and $117,814 for sewer service. It is further

RECOMMENDED that the refund bend be returned to utility.

DONE and ORDERED this 25th day of November, 1980, in Tallahassee, Florida.

H. E. SMITHERS Hearing Officer

Division of Administrative Hearings

101 Collins Building Tallahassee, Florida 32301 (904) 488-9675

COPIES FURNISHED:

R. M. C. Rose, Esquire 1020 East Lafayette Street Tallahassee, Florida 32301

William H. Harrold, Esquire Florida Public Service Commission

101 East Gaines Street - Fletcher Bldg. Tallahassee, Florida 32301

Jack Shreve, Esquire Stephen C. Burgess, Esquire

Benjamin H. Dickens, Jr., Esquire Office of Public Counsel

Holland Building - Room 4 Tallahassee, Florida 32301

Steve Tribble, Clerk

Florida Public Service Commission

101 East Gaines Street - Fletcher Bldg. Tallahassee, Florida 32301

Robert T. Mann, Chairman Public Service Commission

101 East Gaines Street - Fletcher Bldg. Tallahassee, Florida 32301

Docket for Case No: 80-001182

Orders for Case No: 80-001182